Shares of quite a few retail-chain operators had great runs in April, as investors grew more optimistic about their ability to withstand a period of store closures amid the COVID-19 pandemic -- and to some extent, about the likelihood of those stores reopening sooner rather than later.
- Designer Brands (NYSE:DBI), owner of DSW and other shoe-store chains, gained 27.5%.
- Macy's (NYSE:M) was up 19.4%.
- Williams-Sonoma (NYSE:WSM) rose 45.4%.
Here's some important context for those April gains. All three of these companies' stocks had been clobbered in March, as investors reacted to news that most brick-and-mortar stores would be closed for an indefinite period.
So while we might look at April's chart and be happy that these companies all beat the S&P 500 Index, it's a different story when we look at their year-to-date performance through the end of April.
The broad story with all three of these companies is pretty simple. Stores have been closed since mid-March, online sales have only replaced a portion of the lost revenue, and they're hoarding cash until stores reopen and the economy rebounds. That's why the shares fell in March, that's why they rebounded to varying degrees in April, and that's why they're likely to remain volatile for a while longer.
Here's a quick review of the key news items for each company in April.
- For the most part, Designer Brands had a quiet April. The company said on March 29 that it had put most of its retail employees on furlough.
- It said on April 17 that it is piloting a program to sell shoes in Hy-Vee grocery stores.
- On May 1, it said that it is now restricted from paying dividends and repurchasing its stock, in exchange for amendments to its $400 million revolving line of credit that give it greater access to liquidity while its stores are closed.
- Macy's began the month on a grim note: On April 1, Fitch Ratings cut its credit rating to junk levels, and it was demoted from the S&P 500.
- Chief Financial Officer Paula Price said on April 7 that she will leave the company at the end of May.
- Macy's hired an investment bank to explore restructuring options.
- That exploration reportedly led to a plan to raise $5 billion via bonds secured by Macy's real estate.
- Two big credit insurers stopped writing coverage for Macy's inventory purchases.
- Macy's said it will begin reopening U.S. stores on May 4, aiming to have all of its 750 locations open by mid-June.
- The upscale home-goods retailer's stock fared better than the others in April, likely because of its relatively strong balance sheet at the beginning of the crisis: $432 million in cash versus less than $300 million of debt as of January 31. It bolstered that cash reserve further when it drew down its entire line of credit, $487.8 million, on March 23.
- On April 15, it extended its store closures until May 3. (It has since extended them again, through May 17.)
Investors probably won't have to wait too much longer for updates from these three companies. While none have announced dates for their next quarterly earnings reports, all three generally report in the second half of May.